Recently, I was contacted by a member of the board of ApeCoin, which is the BAYC token’s equivalent of a board of directors I guess. They asked for some feedback on some proposal and I offered my thoughts on a call.
I wanted to write about some of the things discussed openly, since I thought they were interesting topics, but particularly because they were topics that “coin voting governance” is extremely poorly suited to properly solving.
Before I start: I don’t own any ApeCoin, nor am I short ApeCoin, I have owned BAYC at times in the past but don’t have any long or short exposure to any Yuga Labs ecosystem stuff currently. I’m not a financial advisor and it has in fact been long rumoured that I am actually an idiot.
Staking used to mean something. I think it was Peercoin that first launched a proof of stake protocol, so probably about ten years ago now. Since then, POS has become increasingly popular for new blockchains, with all the newer trendy ecosystems sitting on POS-ish chains.
For Peercoin and the POS networks that followed, staking had a purpose. Owners would offer their coins as collateral for the chance to validate blocks, and they would be rewarded for doing so. Staking, therefore, rewarded users risking collateral and doing work: participating in functions necessary to the continued operation of the network or protocol.
Somehow, over time, the word ‘staking’ has been repurposed and redefined. Instead of receiving rewards for contributing to chain security with collateral at stake, modern “staking” just seems to mean idk we give you more coins as a reward if you don’t sell your current coins lol.
These modern staking mechanisms do not have any function in the ecosystem to which they belong. They don’t do anything in any practical or technical sense. They don’t make an ecosystem more robust. They are a shell game, using the name of a different thing to obfuscate their actual purpose, which is to encourage less selling.
When POS protocols issue rewards to stakers, they are buying chain security. It’s a worthwhile use of equity. When DeFi projects offer liquidity mining programs, they are buying growth and TVL. Depending on how the program is designed, it can also be a worthwhile use of equity. Spending equity for things that makes the protocol more sustainable, larger or more secure seems worthwhile.
But these “staking” mechanisms (that do not do anything at all except pay users more coins for staking) are giving away equity for nothing except to reduce potential sellers’ liquidity.
If you don’t stake, your share of the network or protocol is inflated away by new emissions. Plus, staking has no risk! You can’t lose coins, because staking doesn’t do anything! So, lock up your coins! Secure them off-market today… In fact, we’ll pay you to do it!
Simply paying users for not selling, payment received in the same asset that they are not selling, seems like pretty late-stage in the games of ponzi creation.
OK quick ApeCoin fact-sheet.
There’s 1bn supply. No new coins can be minted or burned, so the total suppy will always be 1 billion APE.
Token ownership looks like this: